Quarterly refunding, economic data are in focus.
US Treasuries held recent gains as traders awaited data on inflation and economic growth, as well as the debt management team’s plans for sales in the $29 trillion market.
Yields were little changed across the curve after falling for seven consecutive sessions on concern about a slowing US economy. The 10-year yield traded around 4.17%, the lowest level in more than three weeks.
Traders are on the sidelines ahead of key events for the market, including the so-called quarterly refunding plan, which will detail the Treasury’s strategy to fund a $514 billion borrowing need. Also on Wednesday, data is expected to show a contraction in US economic growth in the first quarter as well as a slowdown in inflation as measured by the PCE index in March.
“We are still not in the US recession camp. But we do see a marked slowdown relative to early-in-the-year expectations,” Mohit Kumar, a strategist and chief economist at Jefferies International, wrote in a note. “From a market perspective, this suggests that the risk sentiment rally is likely to stall and potentially take a step back.”
Treasuries have rallied in recent days amid signs the US economy is faltering, supporting bets on further interest-rate cuts. A measure of consumer confidence fell to an almost five-year low, while job openings dropped to the lowest since September. A widely followed measure of Texas manufacturing activity weakened significantly.
The gains brought the 10-year Treasury yield down more than 40 basis points since a peak in mid-April that followed President Donald Trump’s tariff announcements. This month’s trading range for the US benchmark bond is the widest since the collapse of SVB in early 2023.
As the highly volatile month draws to an end, investors are focusing on data to game out where rates and inflation are likely to go as Trump’s tariffs begin to ripple through the economy. Money markets imply 95 basis points of easing from the Federal Reserve this year, which means four quarter-point cuts are almost fully priced. That compares to just three at the end of March.
Bets on more easing were supported by easing inflation expectations. The US 10-year breakeven rate has fallen around 14 basis points in April, the most since 2023. Data later today is expected to show the Fed’s favored measure of price growth decelerated to 0.1% in March from the month before.
Traders are also keeping a close eye on the Treasury Department’s refunding plan, which will set the size of next week’s auctions that include 3-, 10- and 30-year maturities. It also will project the sizes for all the other note and bond auctions through the end of July. Scott Bessent’s team is expected to keep maintain its strategy of sales of longer-dated securities.
“While the Treasury will likely not want to ‘rock the boat’ given recent market instability, focus will fall primarily on whether prior guidance as to coupon sizes being maintained for coming quarters remains in place,” said Michael Brown, senior research strategist at Pepperstone Group Ltd.
